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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003.

OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________

COMMISSION FILE NUMBER: 000-24235

GUARANTY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)


TEXAS
(State or other jurisdiction of
incorporation or organization) 		75-16516431
(I.R.S. Employer
Identification No.)

100 W. ARKANSAS
MT. PLEASANT, TEXAS 75455
(Address of principal executive offices, including zip code)

903-572-9881
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be file by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
|X| Yes  |_| No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12 b-2 of the Exchange Act).
|_| Yes  |X| No

As of November 12, 2003, there were 2,921,928 shares of the registrant’s Common Stock, par value $1.00 per share, outstanding.




GUARANTY BANCSHARES, INC.
INDEX TO FORM 10-Q


                 
PART I – FINANCIAL INFORMATION

   Page  
Item 1.     Interim Consolidated Financial Statements    
      Consolidated Balance Sheets       3  
      Consolidated Statements of Earnings       4  
      Condensed Consolidated Statements of Changes in Shareholders’ Equity       5  
      Condensed Consolidated Statements of Cash Flows       6  
      Consolidated Statements of Comprehensive Income       7  
      Notes to Consolidated Financial Statements       8  
Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations       11  
Item 3.     Quantitative and Qualitative Disclosures about Market Risk       24  
Item 4.     Controls and Procedures       24  


PART II – OTHER INFORMATION
Item 1.     Legal Proceedings       24  
Item 2.     Changes in Securities and Use of Proceeds       24  
Item 3.     Defaults upon Senior Securities       25  
Item 4.     Submission of Matters to a Vote of Security Holders       25  
Item 5.     Other Information       25  
Item 6.     Exhibits and Reports on Form 8-K       25  
Signatures             26  



2



PART I – FINANCIAL INFORMATION
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

GUARANTY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)


September 30,
2003
December 31,
2002
(Unaudited)
ASSETS            
Cash and cash equivalents     $ 30,261   $ 18,055  
Interest-bearing deposits       210     189  
     Total cash and cash equivalents       30,471     18,244  
Interest-bearing time deposits       6,776     —  
Federal funds sold       —     1,530  
Securities available for sale       107,219     106,992  
Loans held for sale       3,034     5,727  
Loans, net of allowance for loan losses of $3,840 and $3,692, respectively       349,954     356,196  
Premises and equipment, net       13,255     13,565  
Other real estate       810     1,111  
Accrued interest receivable       2,775     3,002  
Goodwill       2,338     2,338  
Other assets       9,607     9,263  
        Total assets     $ 526,239   $ 517,968  

LIABILITIES AND SHAREHOLDERS’ EQUITY 		   
Liabilities    
     Deposits    
         Noninterest-bearing     $ 74,617   $ 68,514  
         Interest-bearing       346,107     356,436  
          Total deposits       420,724     424,950  
     FHLB advances and federal funds purchased       55,590     42,763  
     Company obligated mandatorily redeemable preferred    
         securities of subsidiary trusts       10,000     10,000  
      Other liabilities       4,328     5,611  
          Total liabilities       490,642     483,324  
Shareholders’ equity    
       Preferred stock, $5.00 par value, 15,000,000 shares authorized,    
            no shares issued       —     —  
       Common stock, $1.00 par value, 50,000,000 shares authorized,    
           3,252,016 issued at September 30, 2003 and    
           at December 31, 2002       3,252     3,252  
     Additional capital       12,725     12,725  
     Retained earnings       23,407     21,149  
     Treasury stock, 330,088 and 320,088 shares, respectively, at cost       (3,981 )   (3,820 )
     Accumulated other comprehensive income       194     1,338  
         Total shareholders’ equity       35,597     34,644  
         Total liabilities and shareholders’ equity     $ 526,239   $ 517,968  

See accompanying Notes to Consolidated Financial Statements.



3



GUARANTY BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)


Three Months Ended
September 30, 		Nine Months Ended
September 30,
2003
2002
2003
2002
Interest income                    
   Loans     $ 5,788   $ 6,069   $ 17,707   $ 17,947  
   Securities       891     1,229     2,978     3,518  
   Federal funds sold       9     59     38     164  
   Interest-bearing deposits       34     —     42     2  
      Total interest income       6,722     7,357     20,765     21,631  
Interest expense    
   Deposits       1,647     2,408     5,772     7,542  
   FHLB advances and federal funds purchased       516     462     1,492     1,193  
   Minority interest expense-trust preferred securities       250     191     749     565  
      Total interest expense       2,413     3,061     8,013     9,300  
      Net interest income       4,309     4,296     12,752     12,331  
Provision for loan losses       250     335     775     1,035  
      Net interest income after provision for loan losses       4,059     3,961     11,977     11,296  
Noninterest income    
   Service charges       715     780     2,122     2,185  
   Other operating income       478     400     1,586     1,187  
   Realized gain on securities available for sale       16     47     187     364  
      Total noninterest income       1,209     1,227     3,895     3,736  
Noninterest expense    
   Employee compensation and benefits       2,313     2,140     6,997     6,354  
   Occupancy expenses       501     490     1,509     1,450  
   Other operating expenses       1,149     1,053     3,526     2,943  
      Total noninterest expenses       3,963     3,683     12,032     10,747  
      Earnings before income taxes       1,305     1,505     3,840     4,285  
Provision for income taxes       370     413     1,085     1,118  
      Net earnings     $ 935   $ 1,092   $ 2,755   $ 3,167  
      Basic earnings per common share     $ 0.32   $ 0.36   $ 0.94   $ 1.06  
      Diluted earnings per common share     $ 0.32   $ 0.36   $ 0.94   $ 1.05  

See accompanying Notes to Consolidated Financial Statements.



4



GUARANTY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS’ EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)


Three Months Ended
September 30,
Nine Months Ended
September 30,
2003
2002
2003
2002
Balance at beginning of period     $ 35,510   $ 33,746   $ 34,644   $ 31,827  
Net income       935     1,092     2,755     3,167  
Cash dividends declared on common stock       —     —     (497 )   (450 )
Purchases of treasury stock       —     —     (161 )   (130 )
Proceeds from stock option exercises       —     —     —     19  
Change in accumulated other    
    comprehensive income, net of tax       (848 )   146     (1,144 )   551  
Balance at end of period     $ 35,597   $ 34,984   $ 35,597   $ 34,984  

See accompanying Notes to Consolidated Financial Statements.



5



GUARANTY BANCSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)


Nine Months
Ended September 30,
2003
2002
Net cash from operating activities     $ 7,306   $ 6,115  
Cash flows from investing activities    
      Purchase of interest-bearing time deposits       (6,776 )   —  
      Securities available for sale    
           Purchases       (93,781 )   (64,831 )
           Sales       43,403     28,013  
           Maturities, calls, and principal repayments       47,290     23,355  
      Net increase in loans       4,431     (24,068 )
      Purchases of premises and equipment       (454 )   (462 )
      Proceeds from sale of other real estate       1,335     2,941  
      Net change in federal funds sold       1,530     (21,260 )
            Net cash from investing activities       (3,022 )   (56,312 )
Cash flows from financing activities    
      Net change in deposits       (4,226 )   32,606  
      Net change in short-term FHLB advances       10,500     20,000  
      Net change in long-term FHLB advances       (258 )   (245 )
      Net change in federal funds purchased       2,585     —  
      Stock options exercised       —     19  
      Purchase of treasury stock       (161 )   (130 )
      Dividends paid       (497